Many traders think it’s wrong to make money by longing resistance or shorting support.

I disagree

I’m a prop trader, and I’ve been trading $BTC and Ethereum for 3 years

Today I’ll explain how I consistently bet against reversal traders and why this momentum approach works especially well in Bitcoin.

This style of trading is my niche.

This article will cover:

  • Market Conditions > Entry Rules

  • Momentum and Mean Reversion

  • Worst Mean Reversion Conditions

  • My Momentum Trade Criteria

I will cover some concepts first and then get into the technical stuff at the very end.

My big "Aha Moment":

It's all about Market Conditions.

If you take 1000+ trades on any strategy there are going to be good times, bad times and "meh" times

The first thing to understand is that ALL strategies will go through windows of time where they:

  • Do really well

  • Do well

  • Breakeven

  • Do poorly

  • Do really poorly

We want less trades on the left, more on the right.

To achieve this we need to be trading more in "good conditions" and less in "bad conditions".

"Kite Flying" analogy

If the above is understood, it means that:

Optimizing how to define Market Conditions is actually more important than optimizing Entry/Stop/Target rules.

The 2 Main Strategy Styles:

Momentum and Mean Reversion

Momentum (also known as "trend following") and Mean Reversion (also known as "reversal")

Most strategies fall under 2 main styles:

Momentum

  • buy high, sell higher

Mean Reversion

  • buy low, sell high

Understanding the Worst Conditions for Mean Reversion

1. "grind" into the level 2. increasing volume over time 3. "staircase" type of price action 4. high volume/volatility on screener If these are present, the coin is likely in a strong trend.

In order for us to Win we need our Counterparty to Lose.

We need to be trading when our counterparty is trading in their Hardest environment to maximize our chance of winning.

  • Easy for them = Hard for us. ❌

  • Hard for them = Easy for us. ✅

LIVE EXAMPLE

price was slicing through every resistance:

  • makes it harder to short the highs

  • makes it easier to long the highs

An ideal environment for taking a Momentum Long.

Momentum Trade Criteria

slow grind into the level ✅volume consistently increasing ✅ staircase price action ✅

Level Selection:

  • major highs/lows

Entry:

  • candle close through the level

Stoploss Placement:

  • 1st or 2nd swing point (both are valid)

When to NOT take the Momentum Trade:

Knowing when to step on the brakes is just as important as knowing when to step on the gas.

The #1 most important thing to avoid:

  • Vertical Fast Spikes into the entry level

  • These are really good for Mean Reversion, which makes it really bad for Momentum.

Example below ↓

SUMMARY:

Longing resistance and shorting support can work really well in the right environment.

Top 3 things I look for:

  • a grind into the level

  • consistently increasing volume

  • "staircase" price action before the entry (ideally at least 2 hours of it non-stop)

Top 3 things I avoid:

  • fast/vertical spikes into my entry level

  • decreasing volume

  • choppy/sideways type of price action

#MarketRebound